Pressure builds on Europe to delay Mifid II

European policymakers could push back the implementation deadline for Mifid II as concerns grow that firms will run out of time to comply.

The FCA is due to publish its Mifid II policy statement in June 2016, before the legislation comes into force in January 2017.

There are unresolved issues with Mifid II, including a requirement to disclose all charges relating to a product to investors upfront, a different independence definition and tougher inducement rules.

However, the FCA cannot start the consultation process until the European Commission publishes final technical standards.

Draft technical standards published by the European Securities and Markets Authority in September still have to be endorsed by the commission, a process that could take up to three months.

The commission has also yet to publish delegated acts – the detail underpinning the retail part of the legislation. These were due in July but are now not expected before the end of this month.

The FCA has said it will publish one consultation paper on markets issues in December, and another on conduct issues in March.

Cicero Brussels deputy head James Hughes says: “Everyone has been working towards the technical standards and delegated acts being finalised by the end of this year. That would give national regulators enough time to prepare their domestic consultations and the industry close to a year to get ready.

“However, it now looks pretty unlikely that we will have both completed by the end of this year.”

Wealth Management Association director of regulation Ian Cornwall says: “January 2017 would have been a tight deadline even if the delegated acts were published in July, but we have lost five months and it is almost impossible now. However, our advice to our members remains that they should plan for a January 2017 implementation date.”

MEPs are discussing whether the implementation could be delayed.

Hughes says: “We have spoken to a lot of MEPs and they have competing views on how easy it would be to introduce a delay. The FCA is certainly sympathetic to the fact the timetable is becoming increasingly condensed. If the deadline stays the same, the FCA could signal to firms that it will be lenient initially, provided firms can show they have made sufficient effort to comply.”

In a speech at the FCA’s Mifid II conference last month, FCA director of markets policy and international David Lawton said: “We are all too aware that the later it is we consult on, and finally publish, final rules, the less time it is for the industry to prepare and implement. Be assured, we are treading the line between getting things right and moving quickly, carefully.

“The ultimate deadline of January 2017 is universally recognised as challenging. For everyone. Regulators included.

“Even now that Esma has delivered the draft technical standards, it will be for the commission and co-legislators to make decisions about the European timetable, not for national competent authorities.”

Expert view: Mifid II shambles must be delayed

It is a racing certainty that the implementation date will be delayed. If you read David Lawton’s speech at the FCA’s Mifid II conference carefully, he is signalling as clearly as any official can that there is great uncertainty about the timetable.

Furthermore, in International Organization of Securities Commission circles they are talking about not just a 12-month delay but a delay of two or three years.

This is like Solvency II all over again, where the implementation date was eventually delayed by eight years. Frankly, it is a shambles. The European regulatory system is just too cumbersome.

It is very easy to draft the high-level stuff, but then you delegate to technical experts on how it will be implemented. And sometimes you discover that things don’t work in practice.

For example, the idea of having to disclose all product costs upfront is pretty stupid because for funds you only know the costs after the event. Regulators are straining so hard to achieve greater levels of consumer protection that sometimes it cannot be done.

To change the implementation date would require another piece of legislation, but we know it can be done because it has been done before. What the FCA was signalling at the conference was that we are out of time already.

The timetable was very tight 12 months ago; now we are staring down the barrel of a gun.

Recommended

The FCA has clarified some areas of the Mifid II regulation hitting the UK markets, following a roundtable event with industry trade bodies. The regulator has addressed some confusion around rules on recording client communications, saying advisers will not have to record face-to-face meetings. Under Mifid II firms are required to record telephone conversations and […]

Advisers could be banned from collecting any trail commission for legacy business as a result of Mifid II regulation, experts have warned. Under the RDR, previously agreed trail commission is allowed to be paid on pre-RDR investment amounts where products are topped up after 31 December 2012, and on fund switches within a product. Trail […]

Many aspects of Mifid II are set to affect advisers but the big talking point is the definition of independence. In its latest discussion paper, released in March, the FCA stated: “Mifid II requires firms offering independent advice to assess a ‘sufficient range of different product providers’ products’ prior to making a personal recommendation.” The […]

Pension providers are calling on the FCA to backtrack on “disastrous” plans to include pensions as part of Mifid II rules. In March, the FCA published a discussion paper on how it plans to implement Mifid II. Although Mifid II does not cover pensions and insurance-based investments, the regulator believes these products as “often substitutable” […]

Newsletter

Latest from Money Marketing

Studies have found funds can be too big or too small to outperform, suggesting size does matter The assessment of whether to invest in a certain fund is a tricky business. Bearing in mind roughly 90 per cent of active funds do not beat their benchmarks over periods longer than 10 years, the odds are […]

The following sorry verse embodies procrastination on a whole new level: “Hello there, my name’s Phil; I rap like a small bear writing a will [diligently]; Estate-planning, ninja-whooping IHT; Shame I’m not as bizzie [urban affectation] with the RLP.” These words were penned in response to my father’s short verse sent to me, after the […]

Ahead of speaking at Money Marketing Interactive in May, LEBC public policy director Kay Ingram talks about the importance of putting the client at the centre of the advice process and Have advisers reached a point of true professionalism yet? In the 38 years I have worked in our industry, IFAs have seen a monumental shift from […]